The Buyers’ Turn To Play A Little, ‘Take It Or Leave It’
The Mercury News reports from California. “Home prices in parts of (Silicon Valley) are finally falling. That should be great news for prospective buyers. But fewer are lining up for the loans these days. ‘The problem seems to be that people are skittish right now because of what they’re hearing about the market and foreclosures,’ said Ed Moncrief, executive director of Neighborhood Housing Services, which is based in San Jose.”
“‘I don’t want to rush. I’m going to be very methodical about putting together my plan,’ which for him means saving more money for a down payment, said Jamel Evan Wright Sr.,who manages a bank branch in San Jose ‘I would not pull that lever if it does not make sense. Unfortunately, I know too many people who have overextended themselves.’”
The New Sentinel. “Three years ago, builder Tom Doucette was ‘moving at 100 miles per hour’ trying to keep up with the demand for new homes at his project sites. Potential buyers were ‘camping out’ at his FCB Homes subdivisions, hoping to snatch up a piece of real estate at the peak of the housing boom. Business is no longer a blur for Doucette.”
“In Lodi, the number of building permits issued for detached single family homes has plummeted from 396 for all of 2005 to just 18 so far this year, according to city records. And in Galt, permits have fallen from 179 in 2005 to 38 so far this year.”
“Lodi builder Dennis Bennett, who started his company in 1977, said there are a number of reasons for the building slowdown. The media should take some blame for continuing to highlight the trend, he said.”
“Large, corporate home builders are also part of the problem. They’ve flooded regional markets with new homes creating ‘huge inventories.’ That, in turn, lowers sale prices for smaller builders. He noted that this is the fourth housing slowdown he’s seen since starting work in the ’70s.”
The Tribune. “21st Century Mortgage Co., a Paso Robles-based firm that was one of the largest local lenders specializing in high-risk mortgages, has closed after 10 years in business.”
“Noting that she could no longer maintain daily operations, president Linda Kennedy — in a letter to investors dated Aug. 17—said the closure was the result of a ’significant reduction in revenue for the company’ because of the real estate market downturn.”
“‘By definition, the hard-money loan business is a high-risk, high-reward investment.When the real estate market was going extraordinarily well, it was a high-gain—and looked low risk—investment,’ said Joe Diehl, an attorney in San Luis Obispo who represents 21st Century.”
“When it became clear that the firm only had enough money for two weeks of payroll, Kennedy said she notified her five employees (down from a peak of 23 in early 2006) and sent letters to investors. ‘I rode out the ’80s and the stuff in the ’90s,’ Kennedy said. ‘I was just not making it through this cycle. It’s not just me. It’s nationwide.’”
“‘We haven’t received payments on some of our investments for the last six months,’ said Mike Mora of Arroyo Grande. He and his wife invested nearly $300,000 in 21st Century in six investments just more than one year ago.”
“By this June, only two of their six investments were still making interest payments, taking their monthly interest income down to $1,100 a month from more than $3,000 a month, he said.”
The Santa Cruz Sentinel. “Santa Cruz Mortgage has suspended its mortgage banking division, another sign that upheaval in the residential lending industry is hitting home.”
“Brent Edwards, manager of the branch office on Seabright Avenue, said the decision means Santa Cruz Mortgage will act as a mortgage broker, lending money from other sources, but not as a mortgage banker, lending its own money.”
“Until recently, investors assumed home mortgages were a can’t-miss investment, and mortgage companies had no trouble selling them to raise cash to make more loans. Then as property appreciation stalled and homeowners were unable to refinance their adjustable rate mortgages, fewer investors were willing to take the risk.”
“‘I think it’s a good thing to protect ourselves,’ Edwards said. ‘It’s way too risky to continue to fund loans. Investors were dropping like flies. Hopefully things will blow over. When things change, we’re going to go back to doing it.’”
The Desert Sun. “A hot July failed to spark a flurry of activity in the Coachella Valley’s real estate market. Overall sales volume slid 23 percent in July compared with the same month last year, two reports show.”
“Home sales almost always languish in July as part of a seasonal downturn. However, research shows they were further driven down by tighter underwriting standards on the part of increasingly cautious lenders, said Greg Berkemer, executive VP of the California Desert Association of Realtors.”
“Also, the adverse psychological impact of sub-prime mortgage turmoil and news of increasing foreclosures is having an effect, Berkemer said.”
“‘There is still demand for real estate in the desert, and those sellers who have come to terms with the market, their need to price accordingly and are willing to dress their properties are being met with success,’ said Sid Kirkland, broker associate in La Quinta.”
“‘There is a lot more work involved in getting transactions to stay together and to close,’ Kirkland said.”
“About 165 new homes sold in the valley in July, a 30 percent drop from the same month last year, DataQuick reported. Realtors emphasize the time is ripe for buyers, with nearly 8,600 homes in the valley to choose from, a barrage of ‘New Price’ and ‘Reduced’ signs and reasonably low interest rates.”
“Many potential home buyers are getting mixed signals, prompting them to simply sit on the sidelines and wait it out, real estate agents said. What’s certain is buyers increasingly have gained the upper hand.”
“‘Buyers haven’t had much sway over the last five years,’ Berkemer said. ‘Sellers were kind of like, ‘Take it or leave it.’ Now it’s the buyers’ turn to play a little, ‘take it or leave it.’”
“‘I think it’s a good thing to protect ourselves,’ Edwards said. ‘It’s way too risky to continue to fund loans. Investors were dropping like flies. Hopefully things will blow over. When things change, we’re going to go back to doing it.’”
- Edwards needs to understand that when ‘things blow over’ … nothing will ever be the same as it was for the last 5 years.
Buyers will need cash and resources to qualify for loans. He can continue to look over the rainbow for the past, but he will be dissapointed.
Which leads us right back to http://tinyurl.com/37gth4 .
Man….that is TOO FUNNY!
Too bad that anyone who follows that excellent advice automatically becomes a target in the War on Savers.
LOL. That skit ought to be emailed to a whole lot of people.
That was great! Did you read the comments? This comment was poignant I think, and it reminds me of my own relationship with debt and why I post here. I kind of had a kiddie debt problem– $5k, not so bad, but $0.36 in the bank (I have the ATM receipt!) when I got my first paycheck at a salaried job.
I just feel like people are too protected from making smaller mistakes when they’re young, and they end up making giant ones later. Was everyone else here born financially wise? Anyway, here’s the comment:
————————————————————————-
Yeah, I know! It’s kinda like how I had to use my credit card to buy food for my family and stuff because well, housing cost doubled, my income was stagnant and I was one minor emergency away from the pavement. Yep. Now that was funny!
You should see all those fabulous hand-me-downs that I can’t afford that decorate my overpriced wreck of a house!
Really, the skit is funny. I am now a little more financially secure but unless you’ve been there (in debt up to your eyeballs for necessities because food, electricity and gas to go to work are required) it’s hard not to feel a little victimized.
And yeah, don’t buy stuff if you can afford.
GOVENATOR:
“Mr Edwards……do not be so bitter…..there are lots of faults to go around in California for this and that things”
“Until recently, investors assumed home mortgages were a can’t-miss investment, and mortgage companies had no trouble selling them to raise cash to make more loans. Then as property appreciation stalled and homeowners were unable to refinance their adjustable rate mortgages, fewer investors were willing to take the risk.”
That’s why it will never be the same. Investors won’t accept the garbage loans that were passed onto them like hot potatoes. Going forward loans in a MBS will have to be documented and transparent as to their quality. Without the ability to pass garbage along, a huge amount of home buyers are removed from the market. The buying power of those that can buy will be greatly reduced.
This is the facts going forward. A home is not an investment. Its has the same value as automobiles. This is due to unlimited supply, we are a mobile people. Employers move and people move, nothing is stable. In 1889 would you by land in Ohio when they gave it away in Oklahoma.
“Lodi builder Dennis Bennett, who started his company in 1977, said there are a number of reasons for the building slowdown. The media should take some blame for continuing to highlight the trend, he said.”
A little selfish and out of touch are we Dennis? Uh…me thinks the media has under reported the downturn for a while now. Bet he wasn’t compaining about it when the media over hyped the boom. “Media to blame”….that’s a joke. Fault lies elsewhere my friend. What a tool!
Rule #1: Once somebody blames the media for their woes they have lost all credibility.
“The media should take some blame for continuing to highlight the trend, he said.”
How I read it:
“Reporters should take some blame for continuing to report the trend, he said.”
Berkemer said. ‘Sellers were kind of like, ‘Take it or leave it.’ Now it’s the buyers’ turn to play a little, ‘take it or leave it.’”
I have simplified that to a simple, “shove it up your a$$”. There is nothing for this industry to take but my disgust at their actions over the past 10 years.
Patience, grasshopper. You will be able to do some serious lowballing by 2010.
There will be no need to lowball in 2010….by then it will have sunk-in with everyone that 20% down will be required to purchase a home…and by then everyone (even sellers) will realize how out_of_touch prices are and have been. Home prices should be pretty much rock-bottom by then….especially if we fall into a deep recession here pretty soon.
Just a couple years ago
I went out on the road
Seeking my real estate fortune
Looking for a pot of gold
Things got bad, and things got worse
I guess you know the tune
Oh Lord, stuck in Lodi again.
The men in the magazines
Said it was a sure-fire play
Somewhere I lost my funding
Ran of fools to pay
Ran out of time and money
Looks like they took my Benz
Oh Lord, stuck in Lodi again.
Rode in an SL
I’ll be walking out if I go
I was just passing trash
Must be seven months ago
I thought they weren’t making any more land
Looks like my plans fell through
Oh Lord, stuck in Lodi again.
If I only had a dollar
For every flip I’ve done
Every time when people signed, and I just rubbed my thumbs
You know I’d take the next plane
Back to where I’ve been
Oh Lord, stuck in Lodi again.
Oh yogurt, one of my favorite rock groups CCR. Cosmos Factory my favorite album by them.
Did I read that right? 8600 houses for sale and only 165 sales for the month of August? That’s 52 months of inventory. He11 yes there’s lots to choose from! Holy Cow!
On another note, I’m seeing more and more cracks in my little corner of the world, Fortress South Pasadena, California. Price reduced now make up about 20% of the listings on ziprealty. Included is one house that reduced 100,000 in one lump. By my estimation, only eight more drops at that level, and that house will be priced where it should be. (Was 1,299,000, reduced to 1,199,00, should reasonably be about 399,000 based on historical appreciation).
Sigh. We have a long way to go.
Trishyla
Yeah, the CV has been headed down longer than any other California market with the exception of San Diego. In the old days, besides cutting up at the goofy speculators, they were all I had on the west coast. So when they say they are off 30%, that’s down from big falls in 2005-6.
Many thanks for those old days, Ben. This blog has been the only thing standing between me and a lead lined beanie (so much more fashionable than a tinfoil hat!) for the last year or so. It’s hard to maintain your sanity when all around you succumb to the madness. I consider this blog to be therapy for the terminally sane. It’s nice to find others who are similarly inflicted with common sense.
Trishyla
Last post seems to have been eaten, so I’ll try this again.
Many thanks, Ben, for those old days. Reading this blog for the last year or so has been the only thing standing between me and wearing a lead lined beanie (so much more fashionable than a tacky tinfoil hat). It’s so hard to maintain your sanity when all around you have succumbed to the madness. I have come to look on this blog as therapy for the terminally logical. It’s nice to find others who are similarly afflicited with that dread disease: congenital commonsense.
Thanks again, Ben.
Trishyla
You also are calling for 75% haircut? I wish more people were as big bears as me
Bye FL,
On this particular house, a 75% drop is justified. For the rest of my city? At least 60% cut is needed to revert to historical mean. This place went nuts from 1998 to 2007. Prices here more than quadrupled. A house on my street that would have gone for 300,000 to 350,000 pre 1998 went for 1,600,000 last summer. I spoke to the poor fool who bought the house. It’s just starting to sink in just how screwed he really is. He said they’ll probably just ride the downturn all the way down into foreclosure. A shame, because he’s a really nice guy. Not very bright, but nice. To top it all off, he (union cameraman) and his girlfriend (independent producer) probably pull down over two hundred thousand a year. If it’s that bad for them, imagine what most Joe6P’s are feeling right about now.
Wow they should walk away now and rent for 1/4th the cost. The longer the wait, the more money they lose and the bigger the “debt forgiveness” tax will be!
60% decline in San Jose is also needed to get back to norm.
We had 400% increase over 10 years. Majority was back when we had a tech boom in 1999-2000 and fueled by ill gotten gains from stock options. I mean really was Yahoo really worth $350 per share. No of coarse not. Then rates droped and this fueled a buying frenzy in 2002-03. Nearly half of the loans are ARM anyway. Salaries did not increase nearly that much. Its something else to see $1m homes in best areas going into REO. LOL excuse me they are only worth 300-400K.
I have no remorse…a camera guy and independent producer…??? And they are stupid and didn’t know what they were doing??? DOUBT THAT VERY MUCH….there’s another word for what they did…..GREED. Serves them right.
It’s just too bad alot of other people who didn’t deserve to make alot of money and move on scott free did so…WAY too many people didn’t get burned but should have.
Pasadena was the site of that academic couple that publically justified their purchase at the top of the market with prices-always-go-up mumbo-jumbo, right?
You might be thinking of Gary Smith and Margaret Hwang Smith. They are at Pomona College in Claremont, 27 miles east.
So like 4 years and 4 months to sell all of those houses and the October resets are just starting to be in peoples mailboxes. I think that the number of homes for sale will soon go over a 5 year supply and maybe up to a 6 or more year supply. This party is just getting started.
Got popcorn?
I live out here and it’s dumping fast. You’ve never seen such a bunch of faux yuppies in your lives. Everybody has been living high on the hog - when they have to actually live on their paychecks, it’s going to be grim. In 2000, you could buy a decent 3/2 w/pool for about $150K - same house now is still at $500K and was $600K not so long ago. And let’s not forget they build huge wasteful boxes that cost $600/month to cool for about 5 months of the year.
Love that phrase “faux yuppies.” These are people who think they are permanently well off because “everyone knows you never get wealthy renting” (at least the automatic millionaire David Bach and the son of Rich Dad Poor Dad agree with that statement). These nuts are only rich in zillowed estimates of their already overinflated cracker boxes and underweighted in their own net worth.
The buzzard savers like us will wait patiently and swoop down on their houses when they are 50% off. 2012-2013.
I know this will sound stupid, however I would like to suggest a solution to the housing crisis as follows:
1. Since housing is unaffordable based on (median or average) income, the home prices have to come down. To 2 ½ of after tax income (PITI)
2. It will cost the holders of the mortgages or trust deeds $6,000 from what I have read
3. The number of foreclosures are going to be astronomical
Something needs to be done. I would humbly suggest that a trade-off take place wherein the holders of the deeds/mortgages become equity owners in the home and reduce the homeowners payments be 1 ½ times their net income. The US government can be the fall back roll if the private investor is unwilling to buy in. In such circumstances, the US government will pay the difference to the holder of the note. Upon sale of the property, the US government gets paid off before the homeowner out of equity. If the equity at sale is less than the private entity or the US government’s payoff is less than what is owed, then a 1099 is issued.
I think that this will accelerate the drop in prices and give the private investors and the US government a vested interest in raising the wages of the homeowners.
In order to sell this program, responsible individuals will want something in return. This is one idea:
1. All multi-nationals’ income is taxable under US tax code, whereever earned.
2. Manufacturing jobs/infrastructure investments be returned to the US.
3. Voiding all unfair trade agreements such as WTO and NAFTA
4. Pull back US military from throughout the World (No longer the World’s Policeman)
5. Spend funds to educate American citizens at the highest level possible
O, by the way, disconnect all TVs so people will start reading books!!! The American’s attention span is gotten to short. All they pay attention to or understand are “sound bits” with an eight grade” level of education.
So what do you think? Is this a worthwhile tradeoff?
My suggestions are offered so that the backers of our debts feel screwed and no longer offer credit. We will be happy because the price of homes will be reset to acceptable levels. The homeowner/second name on the deed will accept the fact that he is is a renter and if desires to stay in his house for future equity increases, he can. However, he will not be thrown in to the rental market, because is home will be rented (to high of a price for an out right purchase) to him or another renter.
Look it, the current housing costs have to drop dramatically. The government/private equity market needs to show this change for non homeowners in order to purchase.
This, I believe that the comps will show the true value of a home in each respective area.
In essence, the values of home will adjust and the the private market/US govt. will eat the loss potiential, with the possibility, that with increased US productivity, values will increase in the future.
So, what do you think? I do not believe that any of the blogger really want a recession/depression. You all are highly educated/skilled that I suspect that your jobs will be gone in a worst case scenario.
Apparently my first response got eaten, so I’ll just sum up my thoughts thusly: this bailout proposal could only come from a person who doesn’t understand basic economics or ethics. I’m not sure which is your deficiency, but regardless I could not be more opposed to it.
I apolgize if this should be considered an argument, however, do you have any idea what another Great Depression would do to this country? We could have 10 years of unemployment, a World War and total socical breakdown? If i it comes to that, what do think 90 million guns in the hands of the public will do if their families are starving?
Please reconsider, the last thing you really want is another great depression.
“Please reconsider, the last thing you really want is another great depression.”
The error of your logic is to assume that the only way to avoid another Great Depression is to go down the familiar path of asking all the little people who pay taxes to bail out all the high rollers that gamble with no downside on Wall Street. I beg to differ with you.
P.S. I personally believe the best way to sow the seeds of another Great Depression is to assure all investers that there is no downside risk to foolish investment. That is where a standing commitment to free bailout insurance will get you.
Nice try, but that’s a rather specious argument. If a depression is in our future (and one most likely is), then the housing bubble (and subsequent collapse) represents a symptom of the economic frailty of this country, not the cause. The ultimate cause of the US economic troubles is an economy that produces very little in the way of tangible, valuable goods. That’s been the trend since Europe and Japan recovered after WWII and has only accelerated in recent years as the Fed and Wall Street have vainly tried to continue to prop up the US by creating an illusion of a rising standard of living. A major correction is inevitable, the only difference is whether or not people like me get mugged by the government on the way down.
The real problem is fractional reserve banking. Depressions will continue to occur as do the manias, because there is no limit to creating credit. Disassemble the Federal Reserve and return the Treasury to Congress.
They had just as many guns per capita during the last Great Depression so your point is biased, and faulty, on that point.
What kept people from killing each other back then? Since it wasn’t a lack of firepower, it seems they must have had a better set of morals and ethics. Hopefully the coming Greater Depression will help us become a more moral society.
If i it comes to that, what do think 90 million guns in the hands of the public will do if their families are starving?
Think of the shoot out between Val Kilmer, Robert DeNiro, and Al Pachino in “Heat”..
I gotta say, even in semi auto mode; a pair of doubled up 30 round 7.62×39 mags in a $300.00 AK-47 does some severe damage.
“I do not believe that any of the blogger really want a recession/depression.”
Absolutely not. That is why I think the charges for the bailout should come from the pockets of the very, very wealthy folks who caused it, not from the common man’s pocket.
Hmmm. I thought it was the ‘common’ people driving up prices by taking out liar loans for houses their low wages wouldn’t otherwise qualify for
follow the money, not the debt.
Right Crisrose. Some people conveniently ignore the true stories of low wage people who lied about their incomes and bought several homes.
One blogger a few months ago wrote that he heard a valet parker in Phoenix talk about his several homes to another valet parker. It’s but one example.
Left wing economic nuts think only the big business is to blame. Well the I say there are crooks at all levels. Don’t blame capitalism. Blame a lack of law enforcement.
Put all those who committed the fraud in prison and then I’ll think about a bailout. Until then, no bailout for the fraudsters while they are walking the streets. This is just like the open borders shamnesty deal.
“If the equity at sale is less than the private entity or the US government’s payoff is less than what is owed, then a 1099 is issued.”
Basically, you are proposing that the US government to absorb 65%+ of the loss (the 1099 only taxes the loss as income).
“I think that this will accelerate the drop in prices and give the private investors and the US government a vested interest in raising the wages of the homeowners.”
It will certainly accelerate the drop in prices. And the US government will have a vested interest in “raising the NOMINAL wages” through hyperinflation to offset the real costs of implementing this problem. And of course that erosion of wealth causes a very real injury to everyone smart enough to not buy what they could not afford. IE, you are rewarding greed and stupidity.
“So what do you think? Is this a worthwhile tradeoff?”
I don’t think that you’ve really thought the implications of this bailout proposal through in terms of its effect on the real value of dollar. The costs to US taxpayers would be astronomical and would necessitate either high rates of inflation or much, much higher taxes. As either would greatly injure prudent savers such as myself, I could not be more opposed to this bailout proposal.
I aplogize for saying this, however do you really think that this country can take a 40-60% drop in home values? What does that really mean to the shepple?
Look it, I agree this pricing issue on homes is out of wack, but we should really consider out we go about getting the prices back in line (regression to the mean). And I agree, that I do not want the lenders off the hook( let them sue the brokers of wall street and the rating agencies).
My concern is to get the home prices back to realty without sinking our society. And I would humbly suggest that a 50% haircut in pricing over night without a way forward will cause total chaos in our society and the world in general.
Just one stupid person’s opinion.
Got popcorn!
“I aplogize for saying this, however do you really think that this country can take a 40-60% drop in home values? What does that really mean to the shepple?”
Less real estate investers, and more affordable housing.
I aplogize for saying this, however do you really think that this country can take a 40-60% drop in home values?
The country is not going to see a 40-60% drop in home values. Most of California certainly will. Where I live a 50% cut will bring prices down to the level of the oil bust depression 20 years ago.
As far as “taking it,” a 50% haircut for California is a good thing. It means that middle class people will be able to afford a house again. Rather than businesses leaving the state due to the high costs, businesses will be more tempted to stay.
I agree, California and some of the other super-bubble areas need to see a 50% cut. Even a 50% cut in SoCal only gets you back to 2002/2003 prices. It’s not like a 50% drop would take you back to 1985 prices. Even at those prices real estate would be higher than it probably should be. Most of the country will probably only see 10% to 20% drops and I’m sure there will be the odd area that rides through this without any declines. California however, needs a serious spanking in order to get prices back to a reasonable level.
Look, a 50% haircut is not at all extreme when you consider that the biggest reason that prices appreciated 200% PLUS over less than 4 years was thanks to so called “Creative Financing”. Loan products that were traditionally geared to high income people suddenly became widespread. People got caught up in the hype and bid up properties that they can only afford with this easy money. Historically this last housing boom is absolutely unprecedented. The runup in appreciation was a frenzy and made complicit by a government who wanted to divert people’s attention away from a war and their other domestic agenda. The so called strength of the economy was propped up on a deck of cards.
Sorry…. am I sounding too cynical…. Perhaps I should stop paying attention!!!
The 40% to 60% drop is going to happen one way or another. The excess must be paid for. The question is who pays for it. Do we all take the hit (Gov bailout)? Do the lenders take the hit? Do the borrowers take the hit?
I have no interest in bailing out a single investor, speculator, lender, builder, RE agent, overburdened homedebtor, or other fool who got caught up in this feeding frenzy.
ANYONE who paid the least attention to the overall housing market since late 2003 could see it was way out of balance. But instead of paying attention they have chosen to believe the twistified REIC facts and talking points about making land, being different here, rich people moving in, get righ quick, buy or get priced out, blah, blah, blah.
If a recession in the quickest way to purge the malinvestments, bring it on, take the medicine. I am ready for deflation.
Prices will only drop 40-60% in only a few places. Now granted most of California and Florida may see drops like that, however where I live I doubt we will see no more that a 5-10% drop. That is because we did not have double digit increases in home prices. Just like most of the country. Also many people own their homes or have lots of equity in it even in California and Florida. So it will not get as bad for everyone.
Also many people own their homes or have lots of equity in it even in California and Florida
Irrelevant. Prices are determined by the people who are buying and selling, not by the people who aren’t. The price that the last buyer pays for the last house on sale determines the market price for everyone.
Irrelevant. Prices are determined by the people who are buying and selling
To the degree lenders are willing to play too. If lenders are no longer willing to lend many times more than a borrower could possibly ever repay (BIG PROBLEM) then the price is set by the lender and in accordance with incomes (EVEN BIGGER PROBLEM)
I doubt this means sellers will rush to lower their prices to meet the new reality right away, only those who actually need to sell. That price - The price that the last buyer pays for the last house on sale determines the market price for everyone. Until then expect tens of thousands of homes to sit on the market with virtually no sales in many areas.
During the Depression, real-estate lost 90% of its value in the Midwest. I looked up Cook County’s property values in the 20’s and 30’s. Chicago city realestate fell 50%. You will get a haircut and it does seem impossible, but the credit deflation is also that much larger than the 30’s.
The government cannot create hyperinflation without destroying the bond market which is 3x the size of the stock market. By destroying bonds, it destroys the only power the Fed has - setting short term loan rates. Destroying the bond market also destroys the government’s only way to get money other than taxes…issuing bonds!
My solution. Raise interest rates a la Volker. That will get the children off the street, bring on a recession (not a bad thing), help the dollar, and clean up the housing mess quicker.
No! This rewards those who crated this mess - the ones with concentrations of capital. Instead, heavily tax wealth above $100 million and income over $10 million / year.
Especially the billionaire hedge fund managers who created the derivatives scam. I believe their tax rate is only 15%, while the average middle class American pays 28%
Do both - raise interest rates and tax Wall Street big time. Of course neither of these things will happen. We have a shortage of leaders.
Raise capital gains tax and cut out loopholes? Make it more expensive to hold unproductive commercial property (and less attractive to overbuild it)? Actually tax rentier income on par with (gasp!) earned income?
Never! How will we distinguish between the wealthy and the bourgeousie? Unthinkable, mon dieu!
BTW, I just went to see the Nanny Diaries. Expected a satire, found it to be more of a horror movie.
As for myself, low taxes on unearned income is good so I can build my assets … but I face the “stealth tax” of a diminishing dollar. Of course, the hyperwealthy found ways around this, but little guys like me get screwed. I think we need to return to the tax structure of the 1950’s. There’s no sense of fair play in our society any more, and CEO “compensation” has a lot to do with it.
NO NO NO we can’t do this..this of all the people associated with the rap hip hop music biz who would be fired.
Then what??? millions of uneducated ebonics speaking people with no chance of getting a job even sweeping the floor at da Fitty Cents stooodiOH!…
5. Spend funds to educate American citizens at the highest level possible
Much of it is - however if prices drop so much where will the equity come from?
3. Voiding all unfair trade agreements such as WTO and NAFTA
Mexican trucks roll on Monday. Border travelers best have on their best Mad Max armour-and buckle them seatbeats.
Inspection sticker?
We don’t need no stinkin’ gringo inspection sticker.
Tally ho!
i am scared of this :WTF
I mean :wtf:
..
To all the renters - get your money out of banks - these is what is used to loan funds to the homebuyers. The article in mercurynews mentions TechCU as having $732m worth of loan portfolio. they as such pay lousy interest and dollar is falling more than the interest you earn. lets all get our money out of these lending institutions and not contribute to the housing bubble.
“…these is what is used…”
Brush up your Shakespeare,
Start quoting him now.
Brush up your Shakespeare
And the women you will wow.
Just declaim a few lines from “Othella”
And they think you’re a heckuva fella.
If your blonde won’t respond when you flatter ‘er
Tell her what Tony told Cleopaterer,
And if still, to be shocked, she pretends well,
Just remind her that “All’s Well That Ends Well.”
Brush up your Shakespeare
And they’ll all kowtow.
I’m going through a Pynchon phase. A guy is really going to have to stretch to impress me now >; )
Thx, Gwynster, heading out to the local library to find a copy of Against the Day. It sounds right up a HBB poster’s alley…
Like several of Pynchon’s earlier works, Against the Day includes both mathematicians and drug users. “As an era of certainty comes crashing down around their ears and an unpredictable future commences, these folks are mostly just trying to pursue their lives. Sometimes they manage to catch up; sometimes it’s their lives that pursue them.”
The synopsis concludes:
If it is not the world, it is what the world might be with a minor adjustment or two. According to some, this is one of the main purposes of fiction.
Let the reader decide, let the reader beware. Good luck.
http://en.wikipedia.org/wiki/Against_the_Day
… Sometimes they manage to catch up; sometimes it’s their lives that pursue them.”
ok….or for the rest of us, I’ll quote Peter Gibbons:
‘So I was sitting in my cubicle today, and I realized, ever since I started working, every single day of my life has been worse than the day before it. So that means that every single day that you see me, that’s on the worst day of my life. ‘
;0
Yes, Monty Pynchon is excellent. I’ve seen all his films you know. That John Cleese is something else
Sorry, a correction:
2. 2. It will cost the holders of the mortgages or trust deeds $60,000 from what I have read
Hank, its the weekend. Don’t scare us. But it could work.
The condo i rent just sold to a young couple for 359K down from 417K. They did not open any cupboards or turn any faucets. The place is outdated but near golf course and ocean. The New Buyer Home Inspector is coming here on Tuesday. What is he going to be looking for?
Thank you in advance.
The New Buyer Home Inspector is coming here on Tuesday. What is he going to be looking for?
He will check the following:
Plumbing
Toilets
Sinks
Tubs
Laundry
Appliances
Heat & AC
Plugs & light switches
Crawl spaces
Ceilings & walls for cracks
Cupboards
Termites
Radon (in some areas)
Mold
Lead based paint (if requested)
Roof & outside areas around the condo
A good home inspection should take 2 hours-4 hours depending on the size of the place
Condos take less time than houses
If he a regular for the local RealtorNation network he’ll be out in 15 minutes with everything checked as ok.
He’s no fool. He wants to eat next week.
The fix is in, baby!
You know they cannot kick you out or raise the rent until your lease ends. A lease works both ways make them pay you to move early.
Also they get your deposit/last month at closing. Make sure you have the receipt and canceled check.
Ha! In order to renew my lease with the new (California) owners of my apartment complex, I had to sign a paper authorizing them to give me three months notice. This place has turned into a shit hole since a California Corp took it over too. (Located in Austin, TX)
Was just forced to sign a paper authorizing the new California based corporate owners to give 90 days notice if they so choose. Otherwise - no lease for you!
he’ll open cupboards and turn on faucets, among other things
Uhm, Forget about the smell of baked bread or cleaning. Try instead this weekend’s unflushed steamy turd in the WC. You should also feed to roaches.
“‘I feel it’s insane to buy a house at this point,’ he wrote in an e-mail to the Mercury News this week. Among his reasons: Lots of homes on the market now, and prices are still too high; interest rates for jumbo loans are high; and the market will get better for buyers as the slower winter months approach.”
Babu is right. These sellers are still in the denial phase of the housing bubble stages of grief. Reality will eventually catch up to them when it finally becomes clear that there are absolutely no buyers willing to pay 2005 wishing prices.
Fast forward to 2009…
Sadly, Babu came from a country where any token lowering of the price was required to “saved face” on the part of the buyer. Hence, when they knocked of 10K, Babu bit. Now he has a mortgage that is 30% higher than the value of his home.
Said Babu….”how could this happen?. We were told by our RE agent that prices would flatten and then go up again. We were lied to.”
Sacramento: Saturday morning housing update:
I went for a walk with the sweetheart this morning. We came around the corner to see 6 cop cars pulled up in front of a 3500 sf house. They were arresting a squatter who had been living there for a week. Arrested him on an old no bail bench warrant for jumping $150,000 bail in LA.
The housing bubble makes for intersting suburban scenarios these days. Renters move in wearing ankle bracelets because they are under house arrest. Felons on parole for dealing meth. Section 8 tenants in 4000 sf home with granite counters and 3 car garages. Wow. It is a whole new world.
Eeek. I guess ill feel safe in NW Pennsylvania away from all this crime
Yes Bye FL, it is getting very Goofy around Sacramento. Dead lawns, vacant houses, squatters, mortgage fraud, boarding house McMansions, 8 cars per house ……… in fact, MIckey Mouse and Goofy are too tame….it is effin crazy in parts of this town.
Ready for lake affect snow?
Not much “lake effect” snow as ill be about 60 miles from the lake. Snow is fun, crime is not!
Unless he is in Erie, it will be the Ohio Valley Storm System.
Bradford?
Got Zippo?
“In Lodi, the number of building permits issued for detached single family homes has plummeted from 396 for all of 2005 to just 18 so far this year, according to city records. And in Galt, permits have fallen from 179 in 2005 to 38 so far this year.”
Sounds like demand for detached single family homes has plummeted off the edge of a cliff.
As Creedence Clearwater use to say, oh lord stuck in a Lodi again.
“Brent Edwards, manager of the branch office on Seabright Avenue, said the decision means Santa Cruz Mortgage will act as a mortgage broker, lending money from other sources, but not as a mortgage banker, lending its own money.”
Luckily for Brent, there is plenty of easy money in the mortgage lending pipeline — NOT!
Luckily for Brent, there is plenty of easy money in the mortgage lending pipeline
snicker. Now all of the Californians must be so happy to know Jumbo mortgages are nearly impossible to get and the sources for them are drying up weekly.
Well, Californians on this blog. I’d love to buy after 18 to 24 months of “conforming only.” And yea, I’m assuming they’ll raise the conforming limit. Guess what, it is too late to matter! Bwaaa haa ha! Conforming requires documents. That is why no one else is trusted. Bwaaa haaa ha! Bwaaa haaa ha!
Got popcorn?
Neil
‘I’d love to buy after 18 to 24 months of “conforming only.”’
It sounds to me as though the solution to California’s affordable housing shortage is in the bag.
I enjoy reading your posts. From one bear to another
Agree with me for a 75% haircut in CA?
Rents are pretty high already and not trending down at all.
Right now $1600-2000 is the baseline for a quality 1B housing existance in the Bay Area. . . . the equivalent condo is still over $400k, leaving, by my calculations, a 25% haircut to get condo prices down to equivalent rents ($300k mortgage costs ~$1800/mo by my calculations of interest deductions, HOA, overheads, not counting principal repayment)
I doubt you’ll ever see more than a 30% drop in nominal prices in areas like Palo Alto. OTOH, if you’re talking about Chula Vista …
LOL we had 40% drops in PA as well in early 90s.
nothing will save it from dropping. Its a good lesson
for the snotty.
I am a big bear, but don’t think 75% unless there is a depression. In that case, more than 75%.
I live in Aptos near Santa Cruz, and the market has seized up. My neighborhood saw 2-3 places move in March, and then one in July. Otherwise is has been dead. (I should note that the cheapest place to sell around me is $700K and it was small and shitty).
Lots of houses listed, and quite a few that have been pulled from the market and people moving back into them. I guess they were builders trying to flip but decided to sit tight for awhile.
I would guess family median income around here is ~$100K which is really high, but still totally out of whack with house prices.
Oliver
I had dinner with some family members in my spouses’ side. Great discussions until we got into real estate. They were all homeowners and most of them were fairly recent. They bought during the peak. One bought 5 years ago. They ask when we will buy. I told them I’ll buy till I feel comfortable with the prices. Of course, I get the third degree. I shrug it off. I could’ve blasted them with facts but it wasn’t appropiate. The funny thing though, when we got the check they looked at it. I was waiting for someone to make a move. I took it finally. Busted out my wallet and plopped my platinum card. Every one was fumbling around for cash. I also noticed that that the wives were holding the money. They were trying to add up the what the price was with their meal and tried to do some lame math with tip and taxes. I told them finally to forget about it. I mentioned that they have large mortgages to pay. And since I still pay rent, my wife and I have money coming out of my ears! It was classic.
FYI: If I had to put my share on a bill, I typically put double the amount that I think I should pay. No second guessing if I paid too little.
“And since I still pay rent, my wife and I have money coming out of my ears! It was classic.”
Sweet…and true!
He makes 60 she makes 40…med is still around 50…
This has been true for many decades that Cruz salaries are not high. It was and will return to be a cheap area. Just wait and see as return to the mean takes hold.
“‘Sellers were kind of like, ‘Take it or leave it.’ Now it’s the buyers’ turn to play a little, ‘take it or leave it.’”
Suggested contractual provision: Seller must agree to return each weekend to do perform all necessary yard work and to feed the squirrels.
do“‘There is still demand for real estate in the desert, and those sellers who have come to terms with the market, their need to price accordingly and are willing to dress their properties are being met with success,’ said Sid Kirkland, broker associate in La Quinta.”
I could never figure out why people buy RE in these CA desert cities, other than pure speculation; the heat is unbearable, the area is depressing and it lies SMACK dab on the Andreas Fault.
“I could never figure out why people buy RE in these CA desert cities, other than pure speculation; the heat is unbearable, the area is depressing and it lies SMACK dab on the Andreas Fault.”
Yeah, but they aren’t making any more of that!
Yes, but you get closer to San Francisco every year as it moves.
LOL!
For the same reason people buy homes in Florida. Cause when it hits 20 below in Iowa it’s 80 degrees and sunny in Palm Springs! Well, that’s how it started anyway. It is hotter than hell in the Summer, but darn nice in the winter. I spend a few weekends out there playing golf in the winter and it’s awesome. I’ve played a few times in he summer and most of the golf course homes are empty that time of year. The whole area is built around the snowbirds.
I could never figure out why people buy RE in these CA desert cities, other than pure speculation
Price, mostly. They were priced right out of LA and OC, and the IE used to be an affordable place for them to go. I have relatives who did exactly that 10 years ago.
I used to spend summers with relatives in Garden Grove. Believe it or not, there was at least one dairy with pastures in GG as recently as 1975. It was a nice place then. As kids we could walk to Atlantis, walk to the movies, even see the Disney fireworks at night while standing in the driveway.
They grew up, moved out, went to college. GG changed within a decade. I was horrified what happened to the place when I visited a few years ago. Yet the very same Brady Bunch house I played in as a kid was Zillowed recently at $700k.
(post eaten?)
I could never figure out why people buy RE in these CA desert cities, other than pure speculation
Price, mostly. They were priced right out of LA and OC, and the IE used to be an affordable place for them to go. I have relatives who did exactly that 10 years ago.
I used to spend summers with relatives in Garden Grove. Believe it or not, there was at least one dairy with pastures in GG as recently as 1975. It was a nice place then. As kids we could walk to Atlantis, walk to the movies, even see the Disney fireworks at night while standing in the driveway.
They grew up, moved out, went to college. GG changed within a decade. I was horrified what happened to the place when I visited a few years ago. Yet the very same Brady Bunch house I played in as a kid was Zillowed recently at $700k.
The Altantis over by Bolsa HS? wow, that takes me back >; )
Remember the Strawberry Festival in GG and the fields off Euclid where you could buy flats of berries right off the farm?
“‘They don’t want to buy property for 70 cents on the dollar,’ Huhn said. ‘They want to buy for 25 to 30 cents on the dollar. They really want to feed on the dead carcass,’ Huhn said
this is what all of us want, fed cut notwithstanding!
Murphy’s Law:
“Expect the worst, but hope for the best and you will never go wrong.”
It works for me and my last name is Murphy.
I expect barbequed squirrels and cupcakes before I will even think about bidding on your overpriced McCrackerbox.
Cupcakes are for Condos
I also want an essay from each homeowner telling me why I should consider buying their house, and what concessions they are willing to give me so that I select their house over the other 100+ within a one square mile of where we are looking. Anybody else with me?
YES! I thought that whole essay thing so silly in Cali. It’s the ultimate “you need to grovel for my love (or house).” Really pompous in a way.
“Home prices in parts of (Silicon Valley) are finally falling.”
I’m in the market for a houseboat — in the long run, saline holds up better than silicon.
Luv,
Jen
Further, if the local housing market crashes, you can always relocate your household to another local market that is holding its value.
This was in the Hartford Courant: Ha!
Former Mortgage Broker Gets 4 Years In Prison:
A former mortgage broker who used a client’s identity to buy herself a $400,000 house in a plum Manchester neighborhood is headed to prison after her conviction Tuesday on identity theft and forgery charges….
http://www.courant.com/news/local/hr/hc-identity0829.artaug29,0,6099674.story
There is no “plum” neighborhood in Manchester. Must have meant Glastonbury!
I hope the other 10,000+ brokers who lied, cheated, stole meet the same fate >:-)
Invest in private jail companies!!!
Quote from the WSJ: “Underscoring the growing pessimism about housing, economists at Goldman Sachs in New York raised their forecast for the drop in U.S. home prices this year to 7% from a previous 5%. The forecast is based on the S&P/Case-Shiller national home-price index, considered the best such gauge by some housing economists. The Goldman economists expect a further 7% decline in house prices next year. In this year’s second quarter, the index was down 3.2% from a year earlier.
Can you say……….”housing recession”?
Wait until all the REO’s hit the market in 2008. It’s going to be a bumpy ride for the specuvestors the next few years. A 40% decline is in the bag for both coasts.
So, I’m in a restaurant for lunch and grab a copy of the Glendale Republic.. Free local version of AZ Republic. Article from a reator:
3 houses on his street won’t sell. All listed within couple thousand dollars of each other.
House 1) Nicest of the 3. 2) Nice, but western exposure so exposed to long hot afternoon sun. 3) A rental that has not been taken good care of.
Opinion, since house 1 hasn’t sold, it is overpriced. Since 1 is the nicest of the 3, the other 2 are WAY overpriced.
Solution: If you have the niceset house on the street, drop your price 5-10% below everyone else. If you are not the nicest house, drop your price 20% below everyone else.
Screw the HOA based cartel intended to ensure prices only go up. This realtor wants sellers to start a reverse bidding war!
SWEET!!!!!!
Does anyone have any thoughts about what effect a significant drop in home values will have on property taxes? In order to keep the same level or services that politicians think we need, if home prices drop by, say, 50%, won’t politicians try their level best to raise property taxes by 50%, thus screwing over the folks who didn’t buy into the housing Ponzi sceme?
YES raise property taxes and the greedy landlord will pass it on to you as a rent increase.
The “greedy” landlord HAS to pass on the tax increase to cover his payment to the gov”t or he loses the house to tax sale and you get evicted.
Being a landlord does not equate greed. There is also a level of rish that one takes. Things have to be maintained, especially if in a better neighborhood. Of course if you are not making any money on the property - you should not have purchased for the use of a rental anyway. All of these flipper idiots who thought that they were going to make easy money, who are now new landlords are bleeding and these properties may well be an issue. That where local codes come into effect. And of course you always have the slum lords who chose not to do anything and just get by with the very minimum. I have a great respect for the areas where my properties are and therfor only rent to people who have money.
You got the math wrong. If houlsing prices fall 50%, taxes must go up 100% to break even.
You’re right. My lack of math skills earns me a dunce cap (I hope I can locate the US on a world map!)
Go Appalachian State!!!
This comment was for Doug in Boon, NC
Depends where you are. In Washington state the property is not taxed as a percentage of appraised value but rather the appraised value is used to apportion taxes. If all property dropped 50% in appraised value in Washington, the taxes would remain exactly the same; the mil rate would double, however.
hopefully your local goverment may have been running at surplus over the years of the boom if they keep spending down. if not they will get what California got after the other bust. New Governor.
Here’s a 30 home package deal from a troubled lender.
http://longisland.craigslist.org/rfs/411412243.html
How about this one
http://dallas.craigslist.org/rfs/411717666.html
Wow, they couldn’t even be bothered to spell “Payment” correctly. Simply astonshing.
There’s lots of good Fannie deals in the DFW metroplex lately. I see them listed at 25% below comps. A 2200sf 4/2 built in 1999 is listed at $139K. I’m very tempted.
You should tell TXchick those low prices. She wants to overpay $300k for a Texas home that is or will be worth $150k!
Today in Santa Clara I just saw my first Real Estate sign with a “Short Sale” banner added on top. It looks like it’s finally hitting the fan here in Silicon Valley.
Here is a flippe alert … off craigs page
http://sfbay.craigslist.org/sby/rfs/410009151.html
$605000 Price Reduced!! (san jose west)
Sale History
11/06/2006: $470,000
08/28/2006: $462,500
08/04/2005: $540,000
Link -www.hud.gov/offices/hsa/sfh/insured .CFM
It looks like they revived the FHA loan limit amount already in Jan of 2006 to 362K in most regions of California .What would justify raising the loan amount limits in a declining market ?
“Today in Santa Clara I just saw my first Real Estate sign with a “Short Sale” banner added on top. It looks like it’s finally hitting the fan here in Silicon Valley.”
I’m just now beginning to see this phenomenon here in North OC. And the tendency seems to be growing. Well I hope it freakin’ MUSHROOMS for all I care because home prices have far exceeded even above-average incomes and are currently at untenable levels.
The whole situation reminds me of this game I had as a kid. It was a little plastic camel with a couple of little plastic ’sidebags’ on it and each player took turns putting a little plastic ‘log’ onto the camel until one ‘breaks it’s back’ (the thing was made to collapse in the middle) and losses.
I think America put itself in a position where it won’t be able to get investor money for loans unless they are “insured ” loans . I predict that insured loans will be the wave of the future ,(even on 20% down loans ),and the cost of money will go up because of it .
Lenders are holding a punch of loan paper right now that they can’t pass to anyone at this point . Here comes the government offering a loan replacement in a FHA insured loan to take those loans off the hands of the current bagholder lenders .
Watched all new Property Ladder…. Trio of guys flip a condo, and lose at least $36K…still on market so loss may actually be worse.
New Flip theis house… they project the flipper may make $60K or some such.
Then a flash back “flip this house” from a year ago… Their projected profit back then was $75K. It went into escrow, fell out, back on the market, risk of losing it, so decided to rent it out for an amount that covers “most of mortgage”. Already bought a second house to flip… had to cash-out-refi half way through to keep project going… comments like “have to keep your eye on the light of the end of the tunnel or everything would just go black”.
In short, they are probably about 2-3 months from losing both houses to foreclsoure.
Glad they are finally showing flip programs that show the true picture of how risky flipping a piece of junk house is . I have never thought that the flippers that they have shown on these shows were financially solvent enough to even consider fixing up a property . I also have the impression that the bulk of those flippers lied to get the low down loans that they obtained .
When I first saw one of those Flip shows ,about 2 1/2 years ago, my impression was that those shows would encourage the get rich quick public to attempt to flip a house . Than you get a demand for jerks to over pay for fix up houses . Those shows also encouraged people to over improve homes for the neighborhood . But , with “hit the mark appraisals” nobody was taking a risk on over improvements for the area .
I watched those same shows tonight with my wife. I had to check the blog out to restore sanity.
I was “flippin” between those shows last nite as well. I loved the three goofballs with the condo disaster. And the guy Armando or whatever struck me as representing pretty much everything that is wrong with this country at the moment.